Central Bank South Korea Raises the Interest Rates 

The Central Bank of South Korea increased interest rates on Thursday. This is a decision that was anticipated as financial risks heat up despite the virus threat. The Bank raised its policy rate by 25 basis points to 0.75% for the first time in nearly three years, becoming the first developed economy to raise interest rates during the pandemic era.

Bank of Korea Governor Lee Ju-yeol said that the interest rate hike rate was not undisputed, and a contrary board member was calling for rates to be held steady. This decision was divided among analysts polled by Reuters, with only 16 out of 30 expecting the rate hike on Thursday.

One analyst, Alvin Tan, head of Asia FX strategy at RBC Capital Markets, called it a cautious rate hike, even though the market was fully anticipating a string of rate hikes. South Korea benchmark index Kospi fell 0.18% following the announcement. The Korean won weakened.Most central banks globally have sliced rates to record lows in a bid to prop up their pandemic-hit economies. From the U.S. to Europe and Asia, governments around the world have been launching stimulus measures to support businesses. Capital Economics said that the virus remains a headwind to the recovery.

There has been a surge in Covid 19 cases in South Korea. They are striving to control the high numbers of Covid cases in recent weeks, with its rolling 7-day average daily cases surging past 1,800 compared to just over 400 in June. The country extended its social distancing curbs for another two weeks as Covid cases surged.